Biennial IFCAI Conference

October 24, 1997, Geneva, Switzerland

 

Judicial Aspects of the Arbitral Process
The Honorable Austin N.E. Amissah
President, Court of Appeal of Botswana
(London, United Kingdom)


1. Introduction

What would have happened to commercial arbitration if the courts had kept abreast with their case workload; or businessmen had not perceived litigation as an exercise in expense and delay, presided over by judges with little or no specialization in the conditions or practices applied to the subject-matter of a dispute; or the procedures which the courts administer had not been viewed as complicated, technical and of a confrontational nature; or court proceedings had not generally been held in public; or judgment had not been given according to narrow legal concepts and principles? What would have been the fate of international commercial arbitration if those engaged in international business had not become suspicious, whether justifiably or not, of partiality of national courts against foreigners or in favor of national interests? It cannot be said that arbitration today is necessarily a cheap or quick or non-adversarial method of dispute resolution. Overt efforts presently being made by arbitration institutions to reduce costs to parties suggest an implied admission that costs have been mounting to unacceptable levels. It is also not unknown for lawyers, usually bred in the Anglo-American tradition, to question opposing party witnesses in as confrontational a manner as they would in the courts they are accustomed to. The answer to the questions posed is that most probably neither domestic nor international commercial arbitration would have reached the heights of popularity that it has attained today. To that extent arbitration may be seen as a standing indictment of dispute resolution by adjudication.

But do courts have to accept arbitration as a rival mechanism for dispute resolution? It is interesting to reflect in that connection on what the constitutional basis for dispute resolution by arbitration is; especially, in a framework which reposes judicial power of a State in the national judiciary. It will be recalled that the issue of the supremacy of the courts of the State in dispute resolution was raised in the proceedings of the Commission which drew up the UNCITRAL Model Law. In the discussions on Article 5, which provides that in matters governed by the Law, no court shall intervene in arbitral proceedings except where it is so provided, the view was expressed that this limitation in the Law "presented an unacceptably restrictive scope of judicial control and assistance." An argument advanced in support of that view was that a limitation of the court’s authority to intervene in arbitral proceedings might constitute an unwarranted interference in the prerogatives of judicial power, and might even be contrary to the constitution in some States. The reply to the point which won the day was that since the document under preparation was a model law and not a convention, any State which might have constitutional problems could extend the scope of judicial intervention when it adopted the Law without violating any international obligation (1). The history of arbitration has in some jurisdictions been explained either on the basis of an extension of the judicial processes of the State, or as a contractual arrangement given recognition by the courts. Whether one takes the early life of arbitration as an extension of court procedures or as a contractual arrangement which the courts recognize and enforce, it is understandable that the courts should want to play a controlling part in its development. It is natural that the courts would see in arbitration the dispensation of justice by amateurs or by persons not as qualified as the judges in the law. Such persons, therefore, should have the objective correctness of their decisions supervised by the courts.

Whatever the historical explanation for the development of arbitration, it has in many jurisdictions remained close to the judicial system to which it has provided and still provides an alternative mechanism for solving disputes. The closeness is evident from a broad similarity in basic procedures and the ease of transfer from the one system to the other as well as the interchange of personnel engaged in the two systems. Sir Michael Kerr in his Keating Lecture speaks thus of a time not so long ago when arbitration practice in England was not very different from litigation:

"Its modern meaning is a term of art which describes a specialized aspect of legal practice and jurisprudence. But this is only a recent development. Although in the early post-war decades England was already the venue for many hundreds of arbitrations between foreign parties every year, these were procedurally and jurisprudentially akin to litigation... In solicitors’ offices it was run by managing clerks as an adjunct to litigation; and at the Bar it was an alternative to fighting cases in the Commercial List, with the contents of the ‘White Book’ applying equally to both procedures."(2)

This closeness between the two processes is indirectly confirmed by a recent live debate in Finland where the issue was whether judges should be permitted to act as arbitrators. The debate had been fueled by the criticism of judges who made more money through their private arbitration activities than they did in their official employment as State judges. The question at issue then was how those judges could, in such circumstances, manage to devote adequate time to their official judicial duties. One answer given to the question was that the criticism, in itself, amounted to an attack on the independence of the judiciary. But what the debate implied was that the judges were finding it all too easy to apply their judicial skills acquired in and paid for by the courts to the even more lucrative but private art of arbitrating. However, that view cannot be advanced with complete confidence, because at a recent conference in Johannesburg where the question which came up was whether retired judges necessarily made good international arbitrators, the answer was in the negative. According to that opinion, retired judges, in the exercise of their adjudicative functions, become so ingrained with applying strict legal principles to the resolution of disputes that they develop an innate faculty for approaching the exercise of arbitral functions, which requires flexibility in procedures and decision-making, from the same adjudicative stance. The answer seemed to me more applicable to legal systems where appointment to judgeships led to a life-time career extending from the time of completion of a lawyer’s studies to retirement, and not to those systems where lawyers were appointed judges after years of practice of their profession. It seems to me that the answer does not otherwise take account of certain retired judges who have given distinguished service as international arbitrators during their autumnal years. It also does not take into account a provision like Section 93 of the English Arbitration Act, 1996, which allows a judge of the Commercial Court, if in all the circumstances he thinks fit, with the consent of the Lord Chief Justice, to "accept appointment as a sole arbitrator or as umpire by virtue of an arbitration agreement." In the case of the English judges, however, the Act requires that the fees payable for their services are to be taken in the High Court (3), thus protecting them from the temptation to which the Finnish judges are exposed. The Finnish debate in itself indicates that even in jurisdictions where judicial office is a lifetime career, any view which excludes judges, whether active or retired, minimizes the effect of judges as arbitrators and would require heavy qualification. The positions of judge and arbitrator may not always be easy to reconcile, but they are not mutually exclusive and paradoxically both are illustrative of the close but separate character of the litigation and arbitration processes.

The fact remains that in international commercial matters arbitration is preferred to litigation. As is to be expected, "courts and text-writers have repeatedly expressed doubts as to the wisdom of this preference." (4) This reservation has, however, not impressed the commercial consumers who regularly opt for arbitration as their preferred dispute resolution mechanism. For the person engaged in international business, the basic reason for this preference is understandable. Professor Yasuhei Taniguchi explains it in this way:

"Arbitration is preferred to other methods of dispute resolution for a variety of reasons. For the dispute arising from international trade in particular, the advantage of arbitration is undisputed. Alternative will be litigation in a national court or private negotiation. Either party does not like to litigate in the national court of the opponent party. One must face an unfamiliar procedure conducted in a foreign language with possible bias in favor of the local party. Moreover, one must anticipate complicated issues of jurisdiction. When a favorable judgment is obtained, there can be a problem of recognition of foreign judgment unless it is enforced in the jurisdiction of the judgment.

Each jurisdiction has different procedural rules. Today it is marked by a trend of legal unification. But the judicial procedure is the last kind of thing which can be unified because it is not just a legal rule but a practice conducted by the legal professionals trained and nurtured within the tradition of the jurisdiction. The judicial procedure of other countries is not only unfamiliar but can also be onerous and markedly disadvantageous for a foreign party. To be sued in the United States means a jury trial and submission to extensive discovery. For a party and lawyer in the Western world, by the same token, an Asian judiciary may look onerous. Generally speaking, Asian judiciaries were established on the Western model and have a shorter history than the latter. Westerners may have doubts about the competency, fairness and independence of an Asian judiciary. We Japanese think that Japan has the oldest and most modern judiciary in Asia. But even ours is not free from suspicion, justifiably or not."(5)

The question, therefore, arises whether decision-making exclusively by an arbitral tribunal can be made a viable alternative to the decision-making of the courts. The most serious weakness of arbitration as a dispute resolution mechanism is its inability to enforce its orders and awards without the aid of a State authority like the courts. It can define and allocate responsibility; it can order but cannot of itself compel compliance by an unwilling party. This leads then to the further question as to the type of relationship which the arbitral process should have with the courts in order to make the process a viable instrument for effective decisions on the rights and obligations of parties wishing to settle their disputes by arbitration.

The Washington Convention and the ICSID Arbitration Rules show that given the right international backing and the appropriate conditions, such as an international convention governing the States which may themselves be parties before the institution created, and which is administered within a powerful international organization like the World Bank, an arbitral institution and its procedures could, by and large, be operated without the intervention of national courts. The ICSID Convention provides that the consent of the parties to arbitration under it shall, unless otherwise stated, be deemed consent to such arbitration to the exclusion of any other remedy. ICSID ensures that the appointment of arbitrators is made (6) and the ICSID Tribunal rules on all incidental legal points arising from the proceedings, including challenges to its competence (7). There is no need to resort to the courts for assistance to implement the arbitral procedures. The award is binding on the parties, and is not subject to any appeal or to any other remedy except those provided for in the Convention (8). But even the ICSID Convention provides in Article 64 that the International Court of Justice, a judicial body, shall adjudicate any disputes between the Contracting States concerning its interpretation or application, unless the States concerned agree to another method of settlement of such disputes (9). Without the assistance from the courts, ordinary arbitrations would become impossible to conduct. That is why arbitration cannot declare complete independence of the courts. That is why complementarity is the minimum relationship which the judicial and arbitral processes must retain. Even with the ICSID process, in the final act of enforcement of an award a national court may be brought into the picture to ensure treatment "as if it [the award] were a final judgment of a court in that State."(10)

 

2. Change in Relations Between Courts and Arbitral Tribunals

Complementarity and control have been the distinguishing characteristics of the relationship between the judicial and arbitral processes. Fifty years ago, the emphasis was on control. This was best illustrated by the English Arbitration Act of 1950, which was a consolidation of the Arbitration Act of 1889 with some intervening amendments. The courts could intervene in practically every aspect of arbitration. They had a discretion to stay or not to stay litigation in favor of implementation of an arbitration agreement. They decided on the existence and validity of the arbitration agreement. Once the arbitration commenced, the courts not only assisted it by appointing arbitrators when parties defaulted, or in various ways providing interim support for the process, they ensured that the arbitrators kept within the laws and acceptable procedures ruling on challenges to the arbitrators, and objections to the arbitrators’ jurisdiction; stating the law under the "case stated" procedure in the course of the proceedings, and supervising the awards made by arbitrators through the wide interpretation that they gave to challenges to arbitrators on the grounds of "misconduct." Statutes apart, the common law was relied on by the judges to keep arbitrators in order. As stated by Lord Denning in Japan Line Ltd. v. Aggeliki, (11) apart from its statutory powers, the court also had an inherent jurisdiction to supervise the conduct of arbitrators, and could do so and provide remedies wherever such intervention was in the interest of justice.

Today the element of control is less strong. If not so much in domestic proceedings, at least on the international arbitration scene, the doctrine of party autonomy has driven back the forces of judicial control and correspondingly pushed to the fore the element of complementarity in the form of assistance by the courts to the arbitral process. This is mainly due to the adoption by several countries of the UNCITRAL Model Law or clones of it. A declaration of the general principles upon which the new English Arbitration Act of 1996 is founded in one provision admonish the courts not to intervene in matters dealt with under the Part of the Act governing arbitrations pursuant to an arbitration agreement except as provided by the Act; and in another, requires that the parties should be free to agree how their disputes should be resolved, subject only to such safeguards as are necessary in the public interest (12). And the parties can agree to exclude appeals to the courts altogether (13).

The arbitral regime enjoyed within a State depends on its own arbitral laws. In the absence of agreement to the contrary, the law governing arbitration proceedings is the law of the country in which the arbitration is held (14). Some States apply the same laws to both domestic and international arbitrations. Where there is a distinction, control by the courts over domestic arbitrations is usually more pronounced than in the case of international proceedings. This situation is justified by the argument that the body of judge-made law in the domestic system is too highly developed to be easily abandoned for an entirely new system. Besides, the pressures for uniformity in international practice and procedure are not as keenly felt in the domestic situation. Thus, the half-way house reforms in the English arbitration law of 1979 gave parties the option, except in a specified number of cases, to exclude the supervision of the courts from international arbitrations, at any time before or after the time the dispute has arisen, the exclusion option given to parties in a domestic dispute could only be agreed after the dispute had arisen. In 1987, the Swiss Private International Law Act, gave the right to the parties, in situations where none of them has his domicile, habitual residence or a business establishment in Switzerland, to exclude, by express statement either in the arbitration agreement or by a subsequent agreement in writing, all judicial setting aside proceedings or to limit such proceedings to one or more grounds specified in a list in the legislation (15). The recent recommendation of the Committee dealing with the reform of the South African arbitration law was to bring the law abreast with the international standards found in the Model Law. But this was to apply only to international arbitrations; the domestic law being left for some other reforming organ, as the body of precedents in domestic arbitrations was too important to ignore. And it comes as a surprise to the outsider that France, the home of the International Court of Arbitration of the International Chamber of Commerce has an article in its Civil Code which provides that an "arbitration clause is invalid if the law does not otherwise provide,"(16) and that the only law which authorizes arbitration is the French Commercial Code. The result is that a problem could be created with respect to the validity of domestic commercial arbitration clauses; international commercial arbitrations being saved from this fate by a series of judicial interpretations (17). However, these differences in national laws, though interesting, are beyond the purview of this paper. The paper confines itself to the interface between the courts and the international arbitral process. As a model of a modern system which promotes the ideas of complementarity and limitation of the opportunities for intervention by the courts, it is appropriate to turn to the limitations introduced by the UNCITRAL Model Law to the control exercised by the courts over international arbitrations.

 

3. The Model Law and the Courts

The UNCITRAL Model Law which was adopted by the United Nations in June 1985 has been for the past decade the model legislation setting the trend for a restriction of court intervention in international commercial arbitration. Its great merit lies in the fact that it was intended by the United Nations to harmonize arbitration legislation worldwide, and therefore had to adopt principles and procedures which would command the widest possible acceptance. It has so far been adopted by a number of developed and developing countries. Among the developed States are Australia, Canada, New Zealand, Scotland, and a number of the states of the United States. The developing countries which have adopted some form of the Model Law include Egypt, Hong Kong SAR of China, India, Kenya, Malaysia, Nigeria, Tunisia and Zimbabwe. South Africa has recently published a statutory proposal based on it, which is expected to be enacted into law in 1998. The UNCITRAL Rules of procedure in arbitrations of an earlier vintage have been the best known set of rules regulating ad hoc arbitrations since their adoption in 1976. The form of the UNCITRAL Rules was used in the U.S.-Iran Claims Tribunal with the admiration of leading authorities on arbitration.

It will be recalled that Article 5 of the Model Law specifically provides for the occasions and extent of intervention by the courts in matters governed by the Law. Pursuant to that provision, Article 6 identifies the provisions where a court is required to perform functions under the model. They are Articles 11(3) and (4), 13(3), 14, 16(3) and 34(2). The obvious observation provoked by this list is that the opportunities for court intervention are indeed very limited.

Article 11(3) deals with the failure of the parties to agree to appoint arbitrators. Sub-paragraph (a) provides that in an arbitration with three arbitrators, each party shall appoint one of the arbitrators, and in that case, where there is a failure by one of the parties to make his appointment within the specified time, a party may request the court to make the appointment. The court may also be approached for help where the two party-appointed arbitrators have to appoint a third, and they fail within the time limit from their appointment to agree on the third arbitrator. Under sub-paragraph (b) of the Article, the court could be approached by a party to make the appointment of a sole arbitrator where the parties fail to agree on the arbitrator. Article 11(4) also deals with a failure of the parties either to act or to agree, or a failure of a third party, such as an institution, to perform, under an appointment procedure agreed upon by the parties, and gives a right to request the court to take the necessary measures.

Article 13(3) deals with the court’s intervention with respect to a challenge to an arbitrator within a time-limit of fifteen days after a party becomes aware of the constitution of the tribunal or of any existing circumstances giving rise to a justifiable doubt as to his impartiality. The party making the challenge may, if the challenge is unsuccessful, request the court to decide on the challenge. The right to request the intervention of the court in a case where the arbitrator is unable to perform his functions or for other reasons fails to act without undue delay is given to a party by Article 14, in a case where the parties cannot agree on terminating the arbitrator’s mandate.

On the all-important question of arbitrators deciding on their own competence, the initial decision of the arbitrator is subject to a request to the court for its decision, by Article 16(3), if the arbitrators’ decision that he has jurisdiction is given as a preliminary point. If the decision is made part of the final award, then the manner of attacking it is by a request to set aside the award under Article 34(2), the provision which sets out comprehensively and completely the only grounds for setting aside an award.

Despite the provision in Article 6, the listing of the occasions when requests could be made to a court omits certain provisions which enable to court’s assistance in the course or as a result of arbitration proceedings. The list does not, for example include Article 8, which deals with a slightly reversed situation where, the cause for the approach to the court emanates, not from a challenge to the arbitral proceedings, but rather from an allegation of the existence of an arbitration agreement which the applicant wants implemented. Article 8(1) gives the court no discretion in the matter; it is obliged, upon the request of the party made within the stipulated time, to refer the parties to arbitration, unless it finds that the arbitration agreement is null and void, inoperative or incapable of being performed. Nor does Article 6 include among its list of provisions where the intervention of the courts may be sought, Article 9, the provision which declares the compatibility of arbitral proceedings with a request either before or during those proceedings to a court for interim measures of protection and for the court to grant it. Article 27 also deals with a situation where recourse to the courts is admitted under the Model Law. It gives power to the arbitral tribunal or a party with the approval of the tribunal to request from a competent court assistance in taking evidence.

The most important court intervention sought by successful parties to international arbitrations relates to the provisions on enforcement found in Articles 35 and 36 of the Model Law. The level of success achieved by international arbitration has been due to the effectiveness of enforcement of awards in so many countries which are parties to the New York Convention. And it is a distinct advantage which arbitration holds over litigation that it has been easier to enforce an international award in many more States than to enforce an ordinary judgment of a court of the same jurisdiction in which the award is given. The grounds which would entitle a party to the enforcement order under Article 36 are a counterpart of the grounds which would entitle an unsuccessful party to the setting aside of an award under Article 34(2). They are also substantially the same grounds as are found for the setting aside or enforcement of awards under the New York Convention. No doubt these enforcement provisions are of such general importance that they deserve their independent existence irrespective of whether the State adopting the law is or is not party to the Convention.

Of the many factors which have contributed to the preference of commercial arbitration to litigation, it is interesting to note that the avoidance of delay seems to be the most important factor permeating the decisions made in the drafting of the Model Law provisions on court intervention. Delay in this sense does not mean just the passage of time. Proceedings cannot be criticized for delay merely because they take some time to complete. A number of legitimate factors such as the complexity of a case, the number of witnesses or exhibits admitted, the facts to be explored etc. could lengthen the time taken by proceedings without attracting censure for delay. What is complained of is the time spent as a result of the manipulative operations of a party who is reluctant to see the proceedings go on or by a tribunal unnecessarily protracting the proceedings. Delay, of course, costs money (18). But this is not the extent of its deleterious effect. It also means frustration and dissatisfaction because of the absence of a final decision. In itself, delay involves several financial and emotive implications. A study of the UNCITRAL Commission which led to the adoption of the Model Law shows that on several occasions when choices had to be made, the risk of delay through dilatory tactics was balanced against the possibility of incurring additional unnecessary expense or a waste of time as a result of a suspension of the arbitral process. Each time the issue was decided against the course which might encourage or promote the use dilatory tactics to prolong the time for decision by the arbitral tribunal. In each case the supremacy of the courts was expressly or impliedly urged in support of suspension of the proceedings of the tribunal pending the decision of the court, otherwise a successful challenge would result in a waste of time and money. In each case the argument failed. This is especially evident in the cases of provisions in the Law that where challenges in court were made, the arbitral proceedings could, if not already started, commence; and where the proceedings have already started, they could continue and an award made while the court proceedings are still outstanding. The Model Law, thus, leans heavily on manipulative tactics designed to delay. Thus, Article 8(2) provides that where an action is brought in court in a matter which is the subject of an arbitration agreement, the arbitral proceedings may nevertheless be commenced or continued, and an award may be made while the issue of granting a stay or not is pending before the court.

Before that formulation of the provision was adopted, divergent opinions were put forward in the Commission (19). One view was that if the arbitral tribunal had already commenced, the court should normally postpone its ruling on the tribunal’s jurisdiction until the award was made. That would prevent the protraction of the arbitral proceedings. Another view was that once the issue as to whether the arbitration agreement was null and void was raised before the court, priority should be accorded to the court proceedings by recognizing a power in the court to stay the arbitral proceedings or, at least, by precluding the tribunal from rendering an award. The view which prevailed was that to permit the arbitral tribunal to continue the proceedings, including the making of an award, while the issue of its jurisdiction was before the court, contributed to a prompt resolution of the arbitration. It was pointed out that expense would be saved by awaiting the decision of the court in those cases where the court later ruled against the jurisdiction of the arbitral tribunal, but that reason did not persuade the Commission. It was, on the other hand, noted that:

"... objections to the existence of a valid arbitration agreement were referred to in Articles 8(1), 16(2), 34(2)(a)(i) and 36(1)(a)(i), which apparently allowed a party wishing to obstruct or delay the arbitration to raise the same objection at four different stages. The Commission was agreed that, while it was not possible in a model law to solve potential conflicts of competence between courts of different States or between any such court and an arbitral tribunal, when considering those articles account should be taken of the need for inner consistency with a view to reducing the effects of possible dilatory tactics."(20)

Again with respect to challenges to arbitrators on the ground of lack of impartiality under Article 13, the point on awaiting the decision of the court was raised, reciting the potential loss of time and money if the challenge were to be upheld by the court. The manner in which the Commission dealt with the view was the same (21).

The other manner in which the drafters of the Model Law expressed their abhorrence of delay in the arbitral process was to make the decision of the court, to which recourse was permitted, final with no right of appeal. This can be found, for example, in Article 11(5), dealing with the appointment of arbitrators by a court, Article 13(3), dealing with challenges to arbitrators in court for lack of impartiality etc., Article 16(3), dealing with the competence of the tribunal to rule on its own jurisdiction and related matters.

One further citation should complete the illustration of the attitude of the drafters of the Model Law to court intervention and to delay. That came out during the consideration of Article 14 dealing with an arbitrator’s failure or the impossibility by him to act. As paragraph (1) of the Article opens, "If an arbitrator becomes de jure or de facto unable to perform his functions or for some reason fails to act without undue delay..." The original proposal for consideration by the Commission opened with the words: "If an arbitrator becomes de jure or de facto unable to perform his functions or for other reasons fails to act..." The record of the consideration by the Commission of the original is as follows:

"Another suggestion was to describe more precisely what was meant by the words ‘fails to act’, for instance by adding such words as ‘with due dispatch and with efficiency’ or ‘with reasonable speed’. It was stated that the criteria of speed and efficiency, while important guidelines for the conduct of an arbitration, should not be given the appearance of constituting absolute and primary criteria for assessing the value of arbitration. It was pointed out that the criterion of efficiency was particularly inappropriate in the context of article 14 since it could open the door to court review and assessment of the substantive work of the arbitral tribunal. There were less reservations to expressing the idea of reasonable speed, which was regarded as a concretization of the time element inherent in the term ‘failure to act’."(22)

Thus, the Commission, though not wanting to raise the status of delay or the absence of it and of efficiency to that of absolute criteria, was, nevertheless, prepared to accept the suggestion that the absence of delay should be given some emphasis in the concept of failure to act, but was not so sympathetic towards the expression of efficiency. Why this distinction? Because the introduction of the criterion of efficiency into the provision could increase the opportunities for court intervention in substantive matters in the arbitral process. An intervention which, in turn, could result in undue delay. The message in this is clear: the members of the Commission assembled were determined to reduce intervention by the courts to the minimum necessary to make the arbitral process workable.

The almost pathological fear by businessmen from developing countries of court actions has a solid foundation. The opportunities for delay in the adjudication processes they often face are intimidating. In some countries, even the service of court processes presents difficult problems: court employed bailiffs may often be unable to effect service because the affected person cannot be found, even where he may regularly be seen by others in the court precincts. In some cases, officials deliberately misfile court dockets so that they cannot be traced on a normal search. The reasons for delay may not always be due to wrongdoing, it may be inherent in the judicial system itself: viva voce evidence is recorded by hand by presiding judges; court records are typed on old manual typewriters often involving any correction of a script resulting in a retyping of the whole document at the risk of fresh mistakes being made to other parts of the document. Systems relying on the English doctrine of binding judicial precedent exist where the law reports are some five to ten years in arrears. Systems also exist where judges under pressure of work may take years to give judgment after the close of hearing, and where the time-lag between a decision at first instance and the decision on appeal in civil cases can take anything up to five or more years. In some cases that may not be the final judgment in the case, as there are several tiers of appellate courts. In such circumstances, businessmen, whether engaged in domestic or international transactions, may be forgiven for developing a healthy aversion to court processes. The foreigner is thus troubled not only by suspicion of bias on the part of local judges but also by a real possibility of interminable delay in the litigation process.

 

4. The New English Arbitration Act as an Alternative Model for Africa

A new vision of complementarity, if more qualified with respect to judicial control than the Model Law, has appeared within the past year. The model arbitration statute which promotes the ideas of party autonomy and limitation of judicial intervention now appearing on the international scene is the English Arbitration Act of 1996. Before its enactment, the 1979 Arbitration Act had abolished the case stated procedure; a statutory measure which was supposed to have introduced a substantial saving in time in the arbitral process. It had introduced the dual appeal procedure, consisting of the application for leave to appeal which, if successful, was followed by the appeal itself. But this in itself did not solve the problem of delay. As Lord Diplock said in Antaios Compania Naviera SA v. Salen Rederierna (The Antaios): (23)

"… the course followed in the proceedings in the Supreme Court illustrates the difficulty of preventing counsel instructed in commercial arbitrations … to which … the Arbitration Act 1979 applies from indulging (no doubt in the supposed commercial interests of the clients) in delaying tactics, so as to attain a similar result to that which it had been possible to achieve before the passing of the 1979 Act by using the procedure of demanding that an award be stated in the form of a special case whenever the contract sued on raised a question of construction that was arguable, however faint the prospects of success.

Unless judges are prepared to be vigilant in the exercise of the discretions conferred on them by … the Arbitration Act 1979, … they will allow to be frustrated the intention of Parliament, as plainly manifested by changes in procedure that these statutes introduced, to promote speedy finality in arbitral awards rather than that insistence on meticulous semantic and syntactical analysis of the words in which businessmen happen to have chosen to express the bargain made between them, the meaning of which is technically, though hardly commonsensically, classified in English jurisprudence as a pure question of law."

It was through inspired judicial interpretation by the House of Lords in Pioneer Shipping Ltd. v. BTP Tioxide Ltd (The Nema),(24) and The Antaios that the principle was established that the 1979 Act intended to ‘promote speedy finality in arbitral awards’; and stringent conditions on the grant of leave to appeal were imposed. Above all, the Act made it possible for parties to an international arbitration to opt out of its provisions on appeals in any form to the courts if they wished to. But this advanced position still kept the English system open to criticism because marine, insurance and commodity agreements were characterized as "special categories" and excluded from this opt-out provision. With respect to these, it was said that the courts desired to retain an element of control over the arbitral process in order to supervise the orderly development of the law in those areas. While parties to international arbitrations could, subject to the special categories, exclude by agreement at any time the appeal provisions, parties to domestic arbitrations could only do so after a dispute had arisen. The 1996 Act largely retains the substance of the 1979 legislation and it additionally incorporates the restrictions introduced by the House of Lords decisions.

The English Arbitration Act, 1996, although not based on the UNCITRAL Model Law, has many provisions which correspond to that Law. The Act has won much praise as a model of simplicity in legal draftsmanship and novelty in approach to old and difficult problems. It has been hailed for curtailing party autonomy to some extent and putting the arbitrator (not the court) in the driving seat of the arbitral proceedings (25). Arbitrators’ powers are enhanced: they can, for example, appoint lawyers or others to assist them; they are obliged to adopt procedures which are suitable to the particular case, avoiding unnecessary delays or expense so as to provide a fair means for the resolution of disputes; and they may exercise other powers which they hitherto had not had. Applications in the course of arbitral proceedings to the court to decide a preliminary point of law, are to be considered only if the tribunal grants permission for them to be made (26). It is held out as an example of restraint on the courts in arbitration proceedings worthy of consideration by developing countries, especially those of Anglophone African jurisdictions, which have not already adopted the UNCITRAL model. It is right that this suggestion be made because the English arbitration law embodied in their Act of 1950, and in some cases of earlier vintage, and possibly the common law as described by Lord Denning in Japan Line Ltd. v. Aggeliki, still govern the arbitration scene in the majority of countries in Anglophone Africa. It is a measure of the success of the promoters of the new Act that critics of the failure of England to adopt the Model Law when Scotland did, have been completely won over by the Act, describing it as "radical" and "a modern advance" on the Model Law (27).

This paper is not intended as an essay on the comparative merits of the Model Law and the English Arbitration Act, 1996. In so far as the new English Act is held out as an alternative to the Model Law for consideration by Anglophone Africa, however, the registration of a caveat is called for.

Professor Taniguchi in his article cited earlier was speaking of the suspicions entertained by non-Asians, whether rightly or wrongly, of litigation in Asia. What he then said would apply, perhaps with greater force, to suspicions entertained by non-Africans of litigation in Africa. Africa has been made aware that in order to attract international commercial arbitrations to the continent, one of the things that it should do is to free its arbitral processes, as far as possible, from undue intervention by the courts. Sir Michael Kerr in his paper at the 1994 LCIA Conference in Nairobi put the position of the laws governing arbitration in an African context in context when, in describing the English system of arbitration before the 1979 compromise Act, he said:

"Whereas Scotland has adopted the model Law, England has decided against it, at least for the foreseeable future. What England enacted instead, and still has, was the modernising Arbitration Act 1979. Its hallmark was the abolition of the so-called ‘special case’ or ‘case stated’ procedure. This had provided the greatest powers for the courts to interfere in the arbitral process, without parallel in any other jurisprudential system, by permitting appeals on issues of law from arbitrators to the courts to an almost unlimited extent. The existence of this system had a profoundly detrimental effect on international arbitrations being held in England whenever they involved parties and lawyers from civil-law countries. This system still exists in many former British territories."(28)

Sir Michael then went on to give this advice to African countries still applying the unreformed English law:

"My advice to the African states interested in furthering the cause of modern arbitration in their territories would therefore unhesitatingly be to adopt the UNCITRAL Model law…"(29)

Lord Mustill who, on the issue of acceptability of the Model Law by England, took an opposite stand to Sir Michael’s, held the same view on this matter. As far back as in 1989, he said with regard to arbitration in developing countries that:

"… the Model, and any other efforts towards harmonisation which may succeed it, have a much greater part to play. There is no intellectual investment in a system which is already up and running, which must be jettisoned if an entirely new legislative structure is adopted. Instead, there is a void to fill, and much with which to fill it. A text which for all its several weaknesses, has been carefully thought out and scrutinised… A structure which is familiar to all the scores (literally) of nations who participated in the deliberations on the draft." (30)

The process for arbitral emancipation from the suffocating care of the courts has been slow, mostly because of inertia in the various countries in tackling such a specialized legislation lacking in popular interest. Gradually the realization has been dawning that a modern arbitration statute which foreigners understand is part of the investment incentive package which developing countries must present to foreign investors. There is some movement on the continent.

For historical or other traditional reasons England prefers to have its own arbitration law. These reasons cannot, as far as is known, be said to have motivated the development of the relationship between the arbitral process and the courts in Anglophone Africa. Though this is not a comparative study of that law with any other, it is sufficient to say that the English legislation retains a wider relationship with the courts than that found in the Model Law. Section 45 of the Act reproduces with alterations the 1979 power of intervention by the courts on a point of law. It gives power, unless otherwise agreed by the parties, to the court, on the application of a party, upon notice to the other parties, to determine any question of law arising in the course of the proceedings which the court is satisfied substantially affects the rights of one or more of the parties. The Act has also retained the right of appeal on a point of law from a decision of the arbitrator to the courts. Section 69(1) provides that, under similar conditions, a party may appeal to the court on a question of law arising out of an award made in the proceedings.

In both cases, once the legal point enters the judicial arena, it is subject to the hierarchy of permitted appeals, which is likely to hold up a final decision for some time. The desire to limit the protraction of the arbitral process will be put in jeopardy. It is true that under the English Act appeals in such matters are not of right, but by way of leave of the courts. The grant of leave is a matter of discretion and can, therefore, be a matter to some extent personal to the judge or judges who deal with the application. The personal aspect may be acceptably controlled in England; it may also be so controlled in Africa and other developing countries. The question, however, is what guarantee is there that the arbitral process which contains such recourse to the courts would not be regarded by foreign contractual partners with the suspicion which Professor Taniguchi highlights? It is also true that the parties may agree to exclude the jurisdiction of the courts under sections 45 and 69. And in each case it is expressly provided in each case that "An agreement to dispense with reasons for the tribunal’s award shall be considered an agreement to exclude the court’s jurisdiction under this section." But such agreement may be overlooked at the time an arbitration clause is inserted in a contract. In that case, if a party wishes this exclusion to be made at a later stage he may find that he cannot obtain the agreement of his contract partner. An exclusion clause would, therefore, not be operative. A wholesale transposition of the English law to Africa then may put parties at the mercy of the courts which they may, whether justifiably or not, have wanted to avoid.

One of the attractions of the Model Law for developing countries is that being a United Nations model, they feel a sense of participation in its formulation and development. As pointed out by Redfern and Hunter: (31)

"The Model Law owes its origins to a request in 1977 by the Asian-African Legal Consultative Committee for a review of the operation of the New York Convention, in relation to an apparent lack of uniformity in the approach of national courts to the enforcement of awards."

The adoption of the Model Law having been commenced by them, it would be easier for developing countries to relate to it. The Model Law also helps the cause of harmonization of modern arbitration statutes. Understanding it in one country gives the foreigner operating in another country confidence that he is entering into an environment whose arbitration law is known to him, and who therefore understands what to expect. Introducing a rival, however good and advanced, as a competitor, does nothing but harm to the harmonization process. Already, Africa has the French arbitral system to contend with as a rival to the Model Law in Francophone countries. To introduce another specialist law for Anglophone countries to look at is to strike a further blow at the cause of harmonization. Of course, there should be no objection to developing countries looking at the English Act, not as a substitute model, but for inspiration on improvements in areas where the Model Law is found to need supplementation or clarification in the national law. The questions of immunity of arbitrators and confidentiality of the arbitral proceedings could, for example, be expressly dealt with by a national statute based on the UNCITRAL Model. And a provision like the one on the extent of the courts’ powers to make interim orders of protection (32), which has been defined more clearly by the New Zealand Act, and as is proposed in the forthcoming South African statute, may be another example.

 

5. Concluding Remarks

What should be the ideal relationship between the courts and the international arbitral process? It should improve and deepen the relationship whereby the two sides see the courts as supplying the power for ensuring that awards and orders of the arbitration tribunal are obeyed; and to promote party autonomy to the fullest extent possible. The courts should be available to ensure that the arbitration process progresses when the parties agree to invite their assistance or an order or award of a tribunal cannot be enforced. Supporters of arbitration should not take it as a foregone conclusion that it will continue to enjoy preference from commercial men when faced with a choice between an increasingly costly, formalized and slow arbitration process, and an improved system of judicial administration. As Lord Mustill put it:

"… it is to my mind undeniable that international commercial arbitration faces some serious problems. At least in its larger manifestations it can be too slow, too formalised and too expensive. It also lacks the procedural teeth which are the prime advantage of the courts. Nobody has yet discovered why the dinosaurs became extinct, but it is a reasonable surmise that their bulk was a significant factor."(33)

Many countries are making serious efforts to avoid delays, simplify procedures and reduce costs, in their litigation processes. If arbitration costs continue to soar and the time taken increases, the only advantage which it would have over litigation will be narrowed down to a degree of confidentiality, which in some jurisdictions is challenged, and which the English Act assumes but does not expressly deal with; the supposed lack of confrontation, which would apply more to the Anglo-American system than in continental countries, as their litigation procedures are reputed not to be so confrontational; the selection of tribunal, language, and procedure; the wider scope of international enforcement of awards, and the suspicion of people of the judicial systems of foreign countries when in dispute with nationals of those countries. The last factor may prove to be the abiding advantage of arbitration as it cannot be easily erased by legislative action by States or by logical argument. The criticism of arbitration as a system which does not yield objective correctness in decisions unless controlled by the courts, can be met by an increasing awareness of parties of the need for knowledgeable arbitrators and an increasing use of the recognized arbitral institutions with their better facilities for the identification and appointment of arbitrators with appropriate relevant knowledge of matters in dispute under arbitration, as well as the laws applicable thereto.

 


Notes

1. See "United Nations Commission on International Trade Law," UNCITRAL Report Excerpts on the "Model Law - Reproduced in International Legal Materials" Vol. XXIV, No. 5, September 1985 from the "Report of the United Nations Commission on International Trade Law" on the "Work of the Eighteenth Session (June 3 to 21, 1985)" (hereafter referred to as UNCITRAL Excerpts), paras. 62 and 63, pp. 1322 and 1323.

2. "Concord and Conflict in International Arbitration," (1997), Vol. 13, No. 2 Arbitration International, 121, pp. 122 and 123. See also Mustill, "Arbitration: History and Background" (1989), Journal of International Arbitration 43.

3. See s.93(4) of the Arbitration Act, 1996.

4. See Mustill and Boyd, Commercial Arbitration (Butterworths), 2nd ed., (1989), p. 33.

5. "The Changing Attitude to International Commercial Dispute Settlement in Asia and the Far East," (1997) The Arbitration and Dispute Resolution Law Journal 67, pp. 72 and 73.

6. See the Washington Convention, Art. 26.

7. See the Washington Convention, Arts. 41, 50 and 51.

8. See the Washington Convention, Art. 53.

9. See Brower and Goodman, "Provisional Measures and the Protection of ICSID Jurisdictional Exclusivity Against Municipal Proceedings," (1991), 6 ICSID Rev-FILJ 431, p. 432.

10. See Convention on the Settlement of Investment Disputes between States and Nationals of Other States, (1965), Art. 54(1).

11. (1980) 1 Lloyd’s Rep 288

12. See the Arbitration Act, 1996 s.1(c) and (b).

13. See the Arbitration Act, 1996 ss.45(1) and 69(1).

14. Dicey and Morris, The Conflict of Laws, 11th ed., Rule 58(2).

15. Art. 192 read with Art. 190 of the Arbitration Act.

16. See Eric Schwartz, "Going Astray in Bordelais," (a comment on a recent decision of the Court of Appeal of Bordeaux) (1997) ADR Law Journal, p. 91.

17. Schwartz, op.cit., pp. 91 and 92.

18. The point was cryptically put by Francis Russell as far back as 1853 in his letter to Lord Brougham when he said "Delay is the chief cause of expense," see Arbitration International (1997), Vol 13, No.3, pp. 253 and 259.

19. See UNCITRAL Excerpts, paras. 91 and 92.

20. See UNCITRAL Excerpts, para. 93.

21. See UNCITRAL Excerpts, paras. 123 and 124.

22. See UNCITRAL Excerpts, para. 138.

23. See 1984 3 AER. 229, p. 232; 1985 AC 191.

24. See 1982 AC 724.

25. See Rutherford and Sims, "Arbitration Act, 1996: A Practical Guide," FT Law and Tax, 21.

26. See s.45(2)(b) of the Arbitration Act, 1996.

27. See Conflict and Concord in International Arbitration, notes 14 and 73.

28. See Arbitration in Africa, p. 19.

29. See Arbitration in Africa, p. 21.

30. Mustill, Arbitration: History and Background, op.cit., p. 55.

31. International Commercial Arbitration, (Sweet & Maxwell), 2nd ed., (1991), 508.

32. See Art. 9 of the Model Law and also the additional provision in Art. 9(3) in the Scottish Act.

33. See Arbitration: History and Background, op.cit., p. 56.

 

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